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Small ticket loans under threat

Banks panic, squeeze small loan tap

Apnaloan.com Research Bureau

07 Nov 2007

ICICI Bank has stopped lending to sub-prime borrowers following the fine of Rs 55 lakh imposed by the Delhi Consumer Commission for employing strong-arm tactics to recover loans.

Business Standard reported on November 7, 2007 the bank has tightened its credit filters and loan underwriting practices following the recent incidents. The bank has become conservative and consumers without any credit history will now find it difficult to get loans.

Another leading player in retail loans, Citigroup too has made its processes more stringent. Citigroup is now spending more time in interactions with every prospective customer in order to understand their needs and repayment capacity, and to seek additional documents if required, says the news report. 

The bank's approach is to make face-to-face interactions with customers mandatory. Enquiries about the customer's monthly income and expenses are now rigorously made. Citigroup advises customers to take a loan that they are capable of servicing efficiently and ensures that monthly installments do not exceed 70 to 80 per cent of surplus income.